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Debt Ceiling May Leave Villages Unscathed

TARRYTOWN, N.Y. — If the federal government defaults, Tarrytown Village Administrator Michael Blau doesn’t see a definite impact on the village.

Blau said it could impact the village through higher interest rates when it borrows money. It could also affect federal grants and payment of those grants to the village.

“However, it would be my belief that the grants we are drawing down have monies already allocated, which should not affect the drawdown,” he said.

Irvington Village Administrator Lawrence Schopfer also cited higher interest rates as one thing that may indirectly impact the village if there were to be a federal government default. He also pointed to collateral.

“All of our cash deposits are secured with collateral held by third parties,” he said. “Often, this collateral is in the form of US Debt. The value of that collateral would be significantly impaired if there were a large scale default by the US government.”

However, Schopfer noted that Irvington “has a limited reliance on direct support from the federal government.”

“We have had scattered grants over the years, but with the exception of the Safe Routes to School grant, all of those grants are closed and money has been received,” he said.

If, in fact, Democrats and Republicans cannot end their bitter stand-off before Tuesday's deadline, local representatives fear the worst, but have assured their constituents that Social Security and Medicare will be taken care of.

"The treasury will still be able to pay our sovereign debt obligations," said Congresswoman Nan Hayworth (R -- Mount Kisco) of New York's 19th District.

Hayworth said the local governments and organizations in Westchester County will be most likely to feel the pinch with things such as Community Development Block Grants. She said the treasury department would have to prioritize its payments and items such as Social Security, Medicaid and military paychecks would likely be at the top of the list, not grants.

"Some might have to give an IOU to their local contractors if they're willing to take one," she said.

Congresswoman Nita Lowey (D - Harrison) of New York's 18th District said failure to raise the debt ceiling could result in higher interest rates that could impact the cost of mortgages and credit card payments.

"Families could lose thousands of dollars from retirement savings and investments," she said. "It is clear that Congress and the president must agree to a plan that ends the default crisis and includes responsible spending reductions that do not balance the budget on the backs of the most vulnerable Americans."

New York State Senator Greg Ball (R, C – Patterson) said the fallout would be especially trying for the state because he feels New York does not rebound quickly from fiscal crisis.

"Historically, New York State takes twice as long to recover from an economic downturn," he said. "So, any recovery caused by this would be doubly hard. It would go beyond lost grant money. It would cause a problem balancing the state budget. It's odd that Washington is making Albany look good right now. But all I can say is this would be devastating at both the state and local level."

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